Cathay posts back-to-back annual losses for first time in its history

posted on 14th March 2018 by Jordan Newton
Cathay posts back-to-back annual losses for first time in its history

The Cathay Pacific Group recorded a loss of HK$1,259 million ($160 million) in 2017 up on the loss of HK$575 million in 2016.

This is the first time the Hong Kong airline group has posted back-to-back annual losses since the company was founded in 1946 as intense competition in Asia and restructuring costs hit finances last year.

On a bright note, Group carriers Cathay Pacific and Cathay Dragon improved their financial position in the second half of 2017, but still posted a significant loss, according to the annual results released today.

The airlines reported a loss of HK$1,538 million in the second half of 2017, compared to a loss of HK$2,765 million in the first half of 2017 and a loss of HK$2,580 million in the second half of 2016.

In a statement, the Group said “fundamental structural changes within the airline industry continued to create a challenging operating environment” for its airline businesses in 2017 and the factors affecting performance were largely the same as in 2016 – overcapacity in passenger markets, and higher fuel prices.

Cathay said as the year progressed it began to see positive results from its transformation programme and “our business also benefited from a strong cargo business, a weaker US dollar, and improved premium class passenger demand”.

Passenger revenue in 2017 was HK$66,408 million, a decrease of 0.8 per cent compared to 2016. Capacity increased by 2.8 per cent, load factor decreased by 0.1 percentage point, to 84.4 per cent. Yield, which was under pressure for most of the year, fell by 3.3 per cent to HK52.3 cents.

The Group’s cargo business benefited from robust demand in 2017, with cargo revenue increasing by 19.1 per cent to HK$23,903 million. The cargo capacity of Cathay Pacific and Cathay Dragon increased by 3.6 per cent. The load factor increased by 3.4 percentage points, to 67.8 per cent.

Tonnage carried increased by 10.9 per cent. Yield rose by 11.3 per cent to HK$1.77, benefiting from the resumption (from April) of the collection of fuel surcharges in Hong Kong and from strong demand.

Cathay Pacific is growing its network this year and will introduce services to Brussels in March 2018, to Dublin in June 2018 and to Washington D.C. in September 2018. It will start to fly to Barcelona all year round in April 2018.

Seasonal services will be introduced to Copenhagen between May and October 2018 and to Cape Town between November 2018 and February 2019. Cathay Dragon will introduce a service to Jinan this month.

As for the future, Cathay Pacific chairman, John Slosar said: “Our priorities for 2018 are our transformation programme, changing the way that we work so as to better contain costs which will strengthen our passenger business further. We are confident of a successful outcome from these efforts. We also look to benefit from a slowing of the decline in passenger yields as global economic conditions improve.

“The outlook for our cargo business is positive and we will take best advantage of opportunities in the growing global cargo market. Increased fuel costs are increasing operating costs and adversely affecting results. Fuel hedging losses are declining.

“We are improving our competitive position by expanding our route network, increasing frequencies on our most popular routes and buying more fuel-efficient aircraft. We have improved productivity and efficiency and at the same time we are improving our already high customer service standards.”

He added: “We are acting decisively to make Cathay Pacific and Cathay Dragon better airlines and stronger businesses. We believe we are on track to achieve strong and sustainable long-term performance.”